An earlier – and colder – start to the already lengthy winter season in the northern regions of North America has led to increased volatility in the pricing of natural gas futures, according to a recent report posted on the Natural Gas Intelligence website.
Natural gas futures were recently trading higher, with forecast heating demand gains setting the stage for volatile trading for the contract going forward.
Below Normal Temperatures
Bespoke Weather Services said colder trends expected in early December have resulted in an increase in its gas-weighted degree day (GWDD) forecast.
“Additionally, Canadian guidance and to a lesser extent American guidance decreased long-range warm risks slightly, though they still showed an overall pattern progression that met expectations and indicated a rapid fall-off in GWDDs beyond Dec. 10,” Bespoke said.
Temperatures across Southern Ontario and the U.S. Northeast are expected to remain colder-than-normal in the near term, providing some support for decreasing natural gas storage levels and rising prices.
It’s important to note that natural gas prices for the winter have increased nearly 30% since the beginning of November. Low storage levels caused by colder-than-normal weather is one of the driving forces behind the increase.
The price rise has so far only impacted the December 2018 to March 2019 period, with pricing starting in April 2019 mostly unaffected by the recent market movement.
Active Business Services notes that a recent natural gas storage report showed a significant decline in storage levels: a reduction of about 134 billion cubic feet, which was 18% above analyst predictions. Storage levels are nearly 19% below their five-year average.
However, current utility pricing has not been factored into the near-term natural gas price swing, so it’s likely that utilities will start increasing their prices on Jan. 1, 2019. Industry insiders suggest that it’s best to advise clients of the coming increase sooner, rather than after costs rise.
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Cold weather is a fact of life for Canadians. But, Active Business Services can help businesses effectively manage risk with proven diversified strategies.